Understanding Credit Score Differences

Understanding Credit Score Differences

There are few numbers in life that matter as much to your financial outlook and well-being as your credit score. However, confusion is the norm for consumers when it comes to this important financial gauge.

The History of Credit Scores

Prior to the creation of standardized credit scores, lenders and loan officers would often develop their own "score card" to assess the risk of lending to a particular borrower. This score card could vary drastically from one lender to the next. The major issue with this original method was that it was based on a loan officer's ability to judge risk, rather than a common set of rules and specific calculations.

So, in the 1980's, the Fair Isaac Corporation set up the first general purpose credit scoring system based on credit bureau information in order to help remove the inherent inconsistencies that arose from having each lender perform their own credit diagnostics. It has since become known as the FICO score and the algorithm has been widely adopted by America's largest credit reporting agencies.

Why would my score differ between credit agencies?

The three major credit bureaus are Equifax, Experian and TransUnion. If you're seeing different scores from each bureau, there could be a few reasons for this. Here are some of the most common ones.

  1. The scores are from different dates. Since your score can change at any time, it's important to compare credit scores from the same date.
  2. The scores were calculated using different scoring models. We'll get into this in the next section, but it's important to know that there are many scoring models out there. When you compare scores among bureaus, make sure they are calculated using the same model. Even with the same model, your scores could vary because each bureau may store information or calculate the score a little differently.
  3. The information in your credit reports varies among credit bureaus. This actually isn't uncommon. Some lenders report to all three credit bureaus, but others report to just two or one or none at all. The information in your credit reports may also be updated at different times at each bureau. In other words, one credit bureau may be missing an account or other information that either helps or hinders your score.

Of course, it's also a good idea to check your credit reports for errors periodically since an error could affect your score. You can check your TransUnion and Equifax credit reports for free on Credit Karma and your Experian report on www.AnnualCreditReport.com.

Why would my score differ between the same credit agency?

Like a thumbprint, no credit score model is exactly the same. Each credit score model has a slightly different formula for weighing credit score factors. The credit bureau can use dozens of different credit score models based on the requirements of different lenders. As an example, a mortgage lender may use a different scoring model than an auto lender because they each place importance on different factors.

Though your scores may vary, they're all based on information in your credit reports. So focusing on what's in your reports could help you build your credit overall.

Other Available Scores

While FICO is the most famous, there are several other versions and providers of credit scores, such as VantageScore, NextGen, BEACON and EMPIRICA. Some scores are directly developed by credit bureaus, while others are developed by outside companies.

Is there a "best score"?

In a word, no. In order to protect revenues, credit reporting agencies will often position their scores as the best or the most predictive. In reality, all scores must adhere to similar guidelines to be truly predictive, regardless of the final output number. All credit scores are built from the same base set of data and statistical procedures.

Like many products and services in the marketplace, there are a plethora of different options for you (and the businesses that serve you) to choose from, simply because every buyer is different. Based on cost and effectiveness in each buying situation, there are credit scores for sale to satisfy each customer.

Score Ranges

Just as a point of reference, it may be important for you to know what the score ranges are for each of the major scoring systems. The higher your score the better, as it is a general gauge of your overall creditworthiness in the eyes of lenders.

  • FICO Score: 300 -850
  • Score from Experian: 330-830
  • Score from Equifax: 300-850
  • Score from TransUnion: 300-850
  • VantageScore 3.0: 300-850

Bottom Line

Because there are hundreds of credit scores that measure many different probabilities, consumers generally do not need to be overly concerned with the type of score or even their number. It's also important to note that your credit score is a variable which can change every time your credit report changes. For these reasons, monitoring changes within a single score over time can be a better way to gauge your overall credit health.

These complicated facets of credit scores are exactly why we developed Credit Karma. By keeping the bureau and credit scoring model consistent, we are hoping to provide consumers with a single, easier-to-follow point of reference on their credit health. Best of all, it's always free to check your credit score with us. In this way, you can access your score as often as you want and always have a consistent baseline to better understand how your score is changing.

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

All Comments

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8 Contributions
957 People Helped

Helpful to 921 out of 1034 people

The thing that baffles me is that this is a free service that is intended to help you make better credit decisions. People are complaining it doesn't have all 3 scores, that it isnt 100% accurate etc... people ITS FREE! What other site is free and lets you update your score everyday and alerts you to inquiries etc? If you want accuracy pay for a service..even then your score could change in a minute!

Reply by
CreditCruiser

1 Contribution
192 People Helped
Helpful to 192 out of 226 people

Also what I have found out is that this free site is generated off the Transunion report and that is usually the lowest of the three score agencies so if you have a good score here then you can be sure that you are doing okay.  And again it is free. 

Reply by
waa57att

1 Contribution
121 People Helped
Helpful to 121 out of 174 people

Free that is not accurate is no help

Reply by
mulberrygal

8 Contributions
343 People Helped
Helpful to 313 out of 406 people

Try credit sesame. They are free and accurate. I just got a new car and they ran my credit and it compared exactly with credit sesame. Credit karma was wayyyyyy off.

1 Contribution
319 People Helped

Helpful to 319 out of 347 people

Unreal!!! I purchase my credit reports every other month. Since the last reports were pulled there have been no changes except the on-time payments, and my score still drops 14 points. I had three different people look at them. The F'in' reports are identical!!!! 

I think it's time to petetion congress for changes:

1.  Consumers should be able to get thier indididual credit scores and reports at least monthly at no charge.

2.  There needs to be more costly punative damages for credit reporting agencies, and creditors for not correcting, or producing complete documentation which substantiates their claim(s). (in a lot of cases, creditors/collection agencies have no obligation to verify the information they report unless the request comes from the credit bureau. And, then the creditor only has to send a confirmation to credit bureau that the debt exists.(no proof, just confirmation).

3.  When an individual's credit score negatively changes, the credit bureau should have to explain how/why the credit score changed.

It's my beleif that these 3 changes will do more to benefit consumers than any adverse effect it may have on creditors or credit bureaus. I look forward to hearing you thoughts.

3. 

Reply by
sak14

1 Contribution
81 People Helped
Helpful to 81 out of 104 people

Until when and if people will take the time to call their congresspersons and be very assertive, nothing will change because the hands that hold the money are in their pockets so it is up to us!!!

1 Contribution
233 People Helped

Helpful to 233 out of 251 people

People, Credit Karma is just a tool for you to use. Believe in it or not, it helps you to understand your credit rating and scoring. But don't live by it. It is only a tool, a reference point. The idea is for you to better manage your personal lives and finances. Don't get wrap around the numbers or the points. A few points won't make a difference in you lives. But a denial of credit may affect them. So thank Credit Karma for this site. Use it only as A TOOL! to your advantage in this crazy world.

Reply by
Yos53

2 Contributions
137 People Helped
Helpful to 94 out of 108 people

Well said it is just that a tool, and it's free and worth what they offer. 

Reply by
Arbor1949

1 Contribution
54 People Helped
Helpful to 54 out of 60 people

Credit Karma provides hundreds of helpful information articles that the others don't! If you actually read and analyze what you see on the C K site, it's amazing! The numbers are just a simple guide and if read completely and you don't just look at the number you're not getting the benefit of what they are trying to do..... and for free! I fully agree with EatKimchi!

4 Contributions
103 People Helped

Helpful to 86 out of 102 people

transunion is so far behind time. i paid my auto loan off long ago. they say i still owe it! but let me be 8 seconds behind paying a credit card off.............. and it is all over their site. WHAT A BUNCH OF CRAP!

THEY SHOULD BE PUT OUT OF BUSINESS!

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